Cryptocurrency volatility markets
- By computing a volatility index (CVX) from cryptocurrency option prices, we analyze this market’s expectation of future volatility. Our method addresses the challenging liquidity environment of this young asset class and allows us to extract stable market implied volatilities. Two alternative methods are considered to compute volatilities from granular intra-day cryptocurrency options data, which spans over the COVID-19 pandemic period. CVX data therefore capture ‘normal’ market dynamics as well as distress and recovery periods. The methods yield two cointegrated index series, where the corresponding error correction model can be used as an indicator for market implied tail-risk. Comparing our CVX to existing volatility benchmarks for traditional asset classes, such as VIX (equity) or GVX (gold), confirms that cryptocurrency volatility dynamics are often disconnected from traditional markets, yet, share common shocks.
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| Author: | Carl Fabian WöbbekingORCiDGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-813390 |
| DOI: | https://doi.org/10.1007/s42521-021-00037-3 |
| ISSN: | 2524-6186 |
| Parent Title (English): | Digital finance |
| Publisher: | Springer Nature Switzerland AG |
| Place of publication: | [Cham] |
| Document Type: | Article |
| Language: | English |
| Date of Publication (online): | 2021/08/02 |
| Date of first Publication: | 2021/08/02 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2024/01/30 |
| Tag: | Bitcoin; Blockchain; Cryptocurrency; Derivatives; Liquidity; Options; Volatility |
| Volume: | 3 |
| Issue: | 3 |
| Page Number: | 26 |
| First Page: | 273 |
| Last Page: | 298 |
| Note: | Open Access funding enabled and organized by Projekt DEAL. |
| HeBIS-PPN: | 517910322 |
| Institutes: | Wirtschaftswissenschaften |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| JEL-Classification: | C Mathematical and Quantitative Methods / C5 Econometric Modeling |
| F International Economics / F3 International Finance / F31 Foreign Exchange | |
| G Financial Economics / G1 General Financial Markets | |
| G Financial Economics / G2 Financial Institutions and Services | |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Creative Commons - CC BY - Namensnennung 4.0 International |
